I’ve never actually used the gallery module but is the image you are using as a watermark a GIF file by any chance?
If so then it may just be that your transparency on the GIF is not going to work on multiple different backgrounds. You would be better off (if your server software supports it) using a PNG with an alpha channel as you should get a precise soft outline then.
If you are already using a PNG then it may be something to do with your image processing software on the server perhaps?
Do you have a link to the image you are using for your watermark so that people here can see it?
Best wishes,
Mark